Selling cars gets the attention, but dealerships increasingly make their real money after the customer has signed the paperwork and driven away. As the huge profits of the pandemic-era car market continue to fade, service departments, parts counters, financing, warranties, and insurance products are becoming increasingly important to the dealership business model.
That change helps explain why dealers can remain highly profitable even when new-car margins weaken. A dealership has several different ways to make money from the same customer, meaning softer showroom profits don’t necessarily translate into weaker overall earnings.
According to Erin Kerrigan, founder and managing director of dealership advisory firm Kerrigan Advisors, the economics are dramatically different between selling and servicing cars. She told CNBC that new-car margins can be around 5 percent, while service margins can reach roughly 50 percent.
“If you lose $10 of new vehicle revenue, you only have to pick up $1 of service to have your gross margin remain flat,” Kerrigan said. That makes the workshop a powerful cushion when demand or pricing in the showroom starts cooling.
The Pandemic Profit Boom Is Fading
Dealership profitability exploded during the pandemic as vehicle shortages pushed transaction prices higher and gave retailers far more pricing power. Kerrigan Advisors data cited by CNBC shows average pretax profit per dealership climbing from $1.9 million in 2018 to $6.8 million in 2022.
Those extraordinary conditions didn’t last, and average gross profit among dealerships owned by publicly traded groups had fallen to roughly $3.9 million by 2025.
However, parts and service moved in the opposite direction, as average dealership gross profit from those operations rose from around $3.3 million in 2020 to $5 million in 2025.
That divergence is a major reason dealers are still relatively sturdy businesses. Customers may postpone replacing a car, especially an expensive one, but they still need oil changes, tires, brakes, repairs, warranty work, and maintenance on the vehicles already sitting in their driveways.
Finance And Insurance Are Huge Profit Centers
The other major money-maker is finance and insurance, usually shortened to F&I. That department handles products such as vehicle financing, extended warranties, prepaid maintenance plans, and protection packages.
The amount of revenue generated by F&I can look small compared with selling cars, yet the profit contribution can be enormous. CNBC reports that Asbury Automotive generated only about 4 percent of its revenue from finance and insurance during the first half of 2026, while those products accounted for 23 percent of gross profit.
